Hawaii’s unemployment rate dipped to 2.7% in August, but the labor force continued to contract in falling to its lowest level in more than five years.

The seasonally adjusted jobless rate, which had been stuck at 2.8% for five straight months, dropped one-tenth of a point, according to data released Thursday by the state Department of Labor and Industrial Relations. Hawaii has the fifth-lowest unemployment rate in the country
and has been under 3% for
37 months.

“I believe Hawaii’s economy will be growing a slower pace for the next few years,” said Eugene Tian, chief economist for the state Department of Business, Economic Development and Tourism. “We now started to have weaker construction activities, but tourism is picking up with visitor expenditures stopping eight months of consecutive declines in June and starting to increase.”

The U.S. unemployment rate, meanwhile, held steady at 3.7% for the third month in a row.

Hawaii’s labor force, which includes those who are employed, those who are unemployed but actively seeking work and those who are self-employed, fell for the eighth month in a row to 661,050 from 662,850 in July. It was the lowest number in the labor force since there were 661,607 in February 2014. Labor force data is compiled from a telephone survey of households.

Those employed also declined for the eighth straight month in falling to 643,050 from 644,500. It was the fewest people employed since 643,443 in January 2015.

“Hawaii’s labor force peaked in January 2017 at 687,400, and since then the labor force has been declining,” Tian said. “There might be more people moving out of the state. The unemployment rates have been stable during the last few months, mainly due to the fact that both the labor force and unemployment have been declining. The labor market condition has been stable since the beginning of the year.”

The number of people unemployed dropped to 18,000 from 18,350 and has fallen for four straight months..

Nonfarm payroll jobs, which are calculated from a mail survey of employers, decreased by 1,800 in August from the previous month. That number would have been up except for a decrease of 2,400 government jobs due to the seasonal function of not hiring primary election workers.

Tian said the improvement in the unemployment rate was mainly due to the decrease in the labor force.

”When the number of people unemployed decreases and, at the same time, labor force also decreases, that results in a stable unemployment rate,” he said. “That is the case for the last few months.”

The unemployment rate fell in all four of the state’s major counties. State and national labor force data is adjusted for seasonal factors, but the county jobs data is not seasonally adjusted and thus does not take into account variations such as the winter holiday and summer vacation seasons.

Honolulu County’s rate decreased to 2.4% from 2.5%, Hawaii County’s rate fell to 3.3% from 3.8%, Kauai County’s rate dropped to 2.5% from 2.7% and Maui County’s rate fell to 2.4% from 2.6%. Within Maui County, Maui’s rate declined to 2.3% from 2.4%, and Molokai’s rate fell to 6% from 6.9% while Lanai’s rate rose to 2.3% from 1.1%.